Victorian Television

From the Wall Street Journal, reprinted in the Sunday Times on 20 October 1991

Great Britain offers a lot of eccentric spectacles to the world, but almost nothing as bizarre as Wednesday’s television rights auction. This is 1991, when viewers in the United States typically choose among 60 television channels, with some cable systems offering as many as 120 channels. Across the water in Belgium, viewers typically have 25 or more channels, including the two BBC offerings. Yet in Great Britain there are only four terrestrial channels, and last week companies that wanted to offer programming were deprived of their licences.

And this process is billed as a move towards market reform. In reality it is a market nightmare.

The fiasco took place because terrestrial television companies are still given regional monopolies. All power is granted to a regulatory body called (with unintended irony) the Independent Television Commission. This body is independent the way Louis XIV was independent: Le telly, c’est moi.

Companies that wanted one of these regional monopolies submitted bids to the ITC. There should have been a puff of white smoke emitting from a chimney when the winners were selected.

The first criterion the bidders had to meet was the “quality” criterion. This amounts to an exercise in national nannyism. The high-toned chaps inside the ITC in effect screen what sorts of programming will elevate the unenlightened British masses — not good television, but television that’s good for them.

Next came the exercise in financial nannyism. The ITC did not merely accept the highest bid. It decided that some bids were too high; the companies wouldn’t have enough resources left over to sustain good programming. So other bidders were selected. Apart from the arrogance of the ITC figuring that it knows how to invest money better than the investors themselves, the premise of this process is absurd. In a market, companies that pay dearly for a property tend to invest more heavily in it so as to recoup their initial costs.

Now it is possible that some bidders went too high. But the market imposes discipline on those companies by devaluing their share price. In fact, even after this absurd review process some of the companies that won franchises were penalised at the market. Yorkshire TV saw its share price drop on Wednesday by 22p.

A cartoon in The Times captured the absurdity by showing an auctioneer with the caption “Sold — to the lowest bidder”.

In short, the British system wildly inflates the prices of these franchises by making them state-sponsored monopolies. The Treasury, which gets the proceeds of the bids, reaps the benefits. Then, so as not to appear too greedy, the system discriminates against companies that have bid around the market price.

But there is more. Two companies, Scottish and Central, were unopposed in their regional auctions, and won franchises with bids of £2,000. Meanwhile, Yorkshire’s bid was over £37m, and two other companies won with bids that were also around that level. Perhaps Yorkshire is a more lucrative market than Scotland, but the disparity is ridiculous.

For many people, the cruel cost of this process is that they lose their jobs. Loser Thames Television will have to shed 1,000 jobs as it shrinks into a production company. TV-am was also a loser and may have to fire 400 employees. This is an era when television choices are expanding, yet in Britain quality enterprises are being torn apart.

It was said during the Tory party conference that all the great Thatcherite issues have been accomplished, but here is one staring Britain in the face. The party that can liberate British television — that can give viewers a choice between 60 channels instead of the pitiful four — will be making a real difference to people’s lives.

Currently relatively few British households are able to live in the equivalent of television’s early 1980s by hooking up to satellite TV. The vast majority are stuck in television’s primitive era. The nation waits for a government that will bring British television into the 1990s and beyond.